Talk about pulling a new product out of thin air. Last week Planters LifeSavers Co. unveiled Life Savers Holes--tiny candies that look as if they've been punched out of the familiar rainbow-colored treats. Of course, Life Savers Holes don't really come from holes in Life Savers. Since their inception in 1912, Life Savers have been made by shaping a sugary candy mixture around a rod, a process that eliminates the need for a center. Yet that didn't stop the folks at Planters Lifesavers. They saw gold in them thar Holes. A package of the tiny fruit-flavored drops contains half the amount of candy in a roll of Life Savers but sells for the same price--50 cents. Even sweeter yet, the company was able to launch the new product while saving millions on research, development and marketing.
They're the supermarket equivalents of "Back to the Future Part m,' and "Police Academy 6." Product spinoffs--formally known as brand or line extensions--are the consumer companies' latest featured attractions. At a time when the cost of launching a new brand runs upwards of $50 million, companies are turning to low-budget, low-risk retreads. Last year two thirds of the 5,779 packaged goods introduced to the marketplace were improved formulations, new sizes or new packages for existing brands, according to Marketing Intelligence Service, Ltd., a new-products reporting firm.
Take a look around the supermarket and you'll see spinoffs everywhere you turn. Mars is currently rolling out a peanut-butter version of its popular Snickers bar, affectionately nicknamed Son of Snickers. Church & Dwight Co., maker of Arm & Hammer baking soda, has introduced carpet deodorizer and oven cleaner. And Colgate-Palmolive is touting its mouthwash, toothpastes and toothbrushes all in a single TV commercial. Kraft General Foods is even introducing a Jell-O brand cake mix. The recycled products may boost companies' short-term revenues, but some industry experts fear it may not serve the public interest. "A lot of [companies] out there are doing nothing more than mediocre, me-too product work," says management consultant Thomas D. Kuczmarski of Northwestern University's Kellogg Graduate School of Management. "What is not occurring is better solutions to consumers' problems."
What's behind the me-too mentality in product development? The rough-and-tumble takeover environment of the '80s contributed to the trend. The threat of hostile bids caused corporations to rethink spending for new-product introductions. And since executive compensation was, generally based on short-term results rather than long-term profits, brand managers gravitated toward goods that would take less time, money and risk to develop. The result has been seemingly infinite variations of everything from Oreos to Cheerios.
In many cases, line extensions can make good sense. They offer companies a way to trade on their best asset--a good name. They also eliminate the need for extensive test marketing. And since they often aren't subject to the fees levied on new brands, they provide a cheap way to get a product onto the shelves. Says Julie Liesse, food reporter for Advertising Age: "It's an easier way to slide new products in."
Yet spinoffs can also lead to pitfalls. When companies slap a famous brand name on every new product, they carry all their corporate eggs in one basket. If one product proves harmful or defective, sales of all brand items can suffer. Brands, like businesses, can also become overextended. Playboy, for example, failed in an attempt to lend its name to family resorts and air fresheners. "Manufacturers may be diluting the equity of their important brand names," says Deborah Roedder John, a management professor at the University of Minnesota. Consumer-goods companies dispute that notion, saying spinoffs actually increase product awareness. Kraft General Foods senior vice president Eric Strobel says that company is careful to spin off only products "that have a very logical relationship to the parent."
More than anything, the spinoff craze poses a threat to product innovation. Nabisco Brands became one of the few companies to launch an entirely new brand when it unveiled Teddy Grahams, one of the most successful new cookies in 25 years. But few companies have followed Nabisco's lead. The last major new home appliance--the trash compactor--was introduced some 18 years ago. Procter & Gamble, father of the brand concept, has not introduced a new brand in two years. And Kraft General Foods reportedly has no new products with completely different names in the works. "Using the brand name is kind of an indicator that you're not marketing great breakthrough products," says Martin Friedman, editor of Gorman's New Product News. In the long run, the demise of breakthrough marketing may leave companies without new sources of profit. And consumers may eventually conclude what moviegoers already know: sequels are only rarely as satisfying as the original.